BEIJING, Feb. 12 -- China's insurers will benefit more than banks as "accelerating" inflation pushes bond yields higher and lending growth slows, according to Morgan Stanley.
"We don't think there's a massive inflation problem in China, but we're definitely in a period of accelerating inflation," said Jonathan Garner, Morgan Stanley's emerging markets strategist. "The insurance companies tend to be more positively levered to inflation than the banks."
China's benchmark Shanghai Composite Index has fallen 9.5 percent this year on concern increases in consumer prices and asset bubbles will spur the central bank to increase borrowing costs.
People's Bank of China Governor Zhou Xiaochuan said on Tuesday. China needs to monitor inflation as analysts forecast consumer prices rose in January by the most since 2008.
"We need to closely watch" the inflation rate, Zhou told reporters in Sydney on Tuesday after a meeting of central bankers. "Right now the inflation rate has started to go up, but the level is still relatively low."
Consumer prices probably advanced 2.1 percent in January from a year earlier, a third straight gain, according to the median estimate of a Bloomberg News survey.
Slowing loan growth
Insurers tend to be able to "reset" the policy premiums and benefit from rising bond yields, while banks have problems with loan growth in "this sort of environment", Garner said.
Still, China's banks probably made more new loans in January than the previous three months combined as lenders anticipated a credit clampdown by policymakers seeking to stem inflation pressures.
New bank lending totaled 1.38 trillion yuan last month, according to the median estimate of 16 economists in a Bloomberg News survey ahead of a government report scheduled for this week.
China Life Insurance Co, the nation's largest insurer, and Industrial & Commercial Bank of China Ltd have declined 14 percent this year in Hong Kong trading, compared with a 10 percent drop in the MSCI China Index.